The Unspeakable Reason That Manufacturing Has To Be Part Of A US Economic Turnaround

Last week Barack Obama announced the appointment of 18 leaders to
a new
Council on Exports as part of his ambitious scheme to double
America's exports over the next five years.

This push to increase exports dovetails with a
related agenda to energize the US manufacturing base.

Of course, whenever you start talking about boosting
manufacturing in America, you're going to encounter sneering
guffaws from folks who insist that if only you knew a little bit
about comparative advantage, you'd realize how foolish it is to
try to rebuild America as a manufacturing dynamo.

And granted, there is a fair amount to sneer at. The 18 corporate
titans on Obama's council -- leaders of companies like Ford,
Verizon, and Boeing -- just screams out as a maintenance of the
corporatist status quo. We don't need more of the same: leaders
of big companies giving self-serving recommendations to the White
House about what constitutes good economic policy.

But stripping that away, pushing manufacturing in America is a
smart idea for a simple, though generally unspoken reason.

In a country with 300 million people, with the staggering
diversity that we have, we're ALWAYS going to have people who are
ill-equipped for "service" or "knowledge" labor, which was
supposed to replace the manufacturing that went overseas.

There's always going to be a sizeable chunk of the population
that lack either the intelligence or just the temperament to do
something that isn't physical or manual.

During the uber-optimistic 90s, the idea was that we'd build
stuff overseas, and do the thinking here, collecting the fat
premiums that come from creative labor. And that has
happened!

As Andy Grove recently wrote in a widely-discussed
BusinessWeek piece, FoxConn has 10x as many employees
building Apple products in China as Apple has in the US.

But Apple is the huge moneymaker, that sports a market cap of
nearly a quarter-of-a-trillion dollars. The logic behind
globalization and comparative advantage does actually work in our
favor -- in that instance.

It's also plainly ludicrous to think that in a country like ours,
everyone would be equipped to migrate towards the high-end of the
"value chain." We could have the best education system in the
world, and it just wouldn't happen. It won't happen in a 50 or
100 years, either.

We actually had a big, booming manufacturing industry up until
recently, soaking up and putting to good use those who were
mainly equipped for physical labor. Unfortunately what they were
manufacturing was housing, at a Fordian scale (had we actually
had more of a real manufacturing ase, it's perhaps possible that
the abundant cheap labor available to build homes might have not
been there, naturally choking things off before they got out of
hand, but that's beyond pointless speculation).

If we're going to reduce unemployment back to anything
approaching historical "healthy" levels, the answer isn't to make
our economy more "dynamic." It's already incredibly dynamic. What
we need are industries that are suitable for the chunk of the
population that used to hammer together homes, and other related
activities of a similar skillset.

What's annoying here is that to argue this, people presume you're
talking about protectionism or subsidies, or some such policies.
But you could easily start just by looking at the various things
that hinder manufacturing (healthcare, labor regulations,
environmental regulations, minimum wage laws, tax policies,
etc.), to see what can be gotten rid of.

Following that, we can go from there, but the bottom line, which
nobody really states, is this: unless we have industries that
require people with lack of mental/office/service skills, we're
always going to have huge unemployment.